Skechers Announces Record Second Quarter 2021 Sales of $1.66 Billion and Diluted Earnings Per Share Of $0.88
LOS ANGELES–(BUSINESS WIRE)– SKECHERS U.S.A., Inc. (“Skechers” or the “Company”) (NYSE:SKX), The Comfort Technology Company™ and a global footwear leader, today announced financial results for the second quarter ended June 30, 2021.
Second Quarter Highlights
- Record quarterly sales of $1.66 billion, an increase of 127.3% year-over-year, and 31.7% over the second quarter of 2019
- Domestic Wholesale sales grew 205.7%
- Direct-to-Consumer sales grew 137.8%
- Record quarterly diluted earnings per share of $0.88
- Fully repaid $452.5 million revolving credit facility
“Skechers second quarter financial results exceeded expectations as we achieved record quarterly sales of over $1.6 billion, a 127.3% increase over the same period in 2020, and 31.7% increase over 2019,” stated David Weinberg, Chief Operating Officer of Skechers. “This growth, along with both record gross margin of 51.2% and record quarterly diluted earnings per share of $0.88, was the result of triple-digit improvements in both our domestic and international businesses compared to second quarter 2020, and over 30% as compared to the second quarter of 2019. We accomplished these financial results even as we continued to face COVID-19 related challenges including delayed shipments and port constraints as well as temporary store closures in some key markets, including India, Canada, and parts of Europe and South America. With a higher average selling price and significantly more units sold, we saw sales increases of 205.7% in Domestic Wholesale, 137.8% in Direct-to-Consumer, and 94.8% in International Wholesale over the second quarter of 2020. As consumers began returning to a more normal lifestyle in many markets, demand increased for our comfort technology products, including in North America, across Europe, and in China, which achieved double-digit gains over both 2020 and 2019. Looking to the remainder of the year and into the next year, we remain confident in the strength of our brand and the relevance of our distinct product offering.”
“Innovation and developing footwear technology has been a significant part of Skechers’ DNA for much of our history – from our durable occupational footwear made to last, to the lightweight cushioning and performance materials for our first generation Skechers GO RUN and Skechers GO WALK lines, to features that deliver comfort in every pair. Other features and products like our Skechers Air-Cooled Memory Foam Technology and more recently our growing recycled collection called Our Planet Matters exemplify this,” began Robert Greenberg, Chief Executive Officer of Skechers. “Our core product philosophy of comfort, style, innovation and quality at the right price has resonated with consumers during the pandemic, and as we emerge from it. Consumers are embracing a more relaxed lifestyle and want to incorporate comfort into their work and weekend wear. To communicate that Skechers is The Comfort Technology Company, we delivered new campaigns for men, women and kids that highlighted this key message. In the second quarter, our multi-platform approach included traditional television, outdoor, print and online in global markets. Our strategic approach to marketing created awareness, drove sales and resulted in our record revenues. Our intention is to continue innovating and improving our comfort technologies to deliver fresh new product in the coming seasons.”
Second Quarter 2021 Financial Results
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Three Months Ended |
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June 30, |
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Change |
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(in millions, except per share data) |
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2021 |
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2020 |
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$ |
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% |
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Sales |
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$ |
1,657.8 |
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$ |
729.5 |
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$ |
928.3 |
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127.3 |
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Gross profit |
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849.5 |
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368.6 |
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480.9 |
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130.5 |
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Gross margin |
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51.2 |
% |
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50.5 |
% |
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72 |
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bps |
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SG&A expenses |
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652.4 |
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432.1 |
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220.3 |
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51.0 |
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As a % of sales |
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39.4 |
% |
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59.2 |
% |
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(1,988 |
) |
bps |
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Earnings (loss) from operations |
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201.2 |
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(61.0 |
) |
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262.2 |
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429.8 |
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Operating margin |
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12.1 |
% |
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(8.4 |
)% |
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2,050 |
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bps |
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Net earnings (loss) |
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137.4 |
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(68.1 |
) |
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205.5 |
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301.8 |
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Diluted earnings (loss) per share |
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$ |
0.88 |
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$ |
(0.44 |
) |
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$ |
1.32 |
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300.0 |
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Second quarter sales increased 127.3% as a result of a 147.3% increase in domestic sales and a 113.7% increase in international sales. Domestic and international growth was driven by increases in both wholesale and direct-to-consumer, as COVID-19 restrictions eased over the prior year. On a constant currency basis, the Company’s total sales increased 117.5%.
Sales grew across all segments with increases to Domestic Wholesale of 205.7%, International Wholesale of 94.8%, and Direct-to-Consumer of 137.8%. Improvements in Domestic Wholesale were the result of higher unit sales volume. International Wholesale increases were driven by 150.2% growth in our European subsidiaries, led by the United Kingdom and Germany, 50.9% growth in China, and 122.3% growth in Distributor sales. Improvements in Direct-to-Consumer sales resulted from growth across both domestic and international retail stores, slightly offset by declines in domestic e-commerce sales. Direct-to-Consumer comparable same store sales increased 109.2%, driven by an increase of 95.6% domestically and 165.2% internationally.
Gross margin increased 72 basis points to 51.2% primarily driven by increased Direct-to-Consumer gross margins, resulting from higher average selling prices and reduced promotional activity. Higher average selling prices were partially offset by the unfavorable channel mix impact from lower domestic e-commerce sales and higher Domestic Wholesale sales.
SG&A increased $220.3 million, or 51.0%. Selling expenses increased by $72.2 million, or 119.9%, due to higher global advertising costs. General and administrative increased by $148.0 million, or 39.8%. The increase was primarily the result of higher incentive compensation and labor costs as well as higher global warehouse and distribution expenses.
Earnings from operations increased $262.2 million to $201.2 million.
Net earnings were $137.4 million and diluted earnings per share were $0.88.
In the second quarter, the Company’s effective income tax rate was 20.4%.
“Our record second quarter results reflect the outstanding execution of our long-term growth strategy. Led by our comfort technology products and resonant brand, we continued to expand globally and further our direct-to-consumer presence,” stated John Vandemore, Chief Financial Officer of Skechers. “The result was evident in growth across our segments and record profitability and is a testament to the prudence of the infrastructure investments we have made and are continuing to make to support our brand and our strategy. These factors coupled with the strength of our balance sheet, give us abundant confidence that Skechers remains poised to continue growing long into the future.”
Six Month 2021 Financial Results
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Six Months Ended |
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June 30, |
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Change |
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(in millions, except per share data) |
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2021 |
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2020 |
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$ |
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% |
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Sales |
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$ |
3,086.2 |
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$ |
1,971.8 |
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$ |
1,114.4 |
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56.5 |
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Gross profit |
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1,529.1 |
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916.2 |
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612.9 |
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66.9 |
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Gross margin |
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49.5 |
% |
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46.5 |
% |
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308 |
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bps |
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SG&A expenses |
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1,180.4 |
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940.2 |
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240.2 |
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25.5 |
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As a % of sales |
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38.2 |
% |
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47.7 |
% |
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(943 |
) |
bps |
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Earnings (loss) from operations |
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358.9 |
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(16.2 |
) |
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375.1 |
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2,315.4 |
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Operating margin |
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11.6 |
% |
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(0.8 |
)% |
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1,245 |
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bps |
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Net earnings (loss) |
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235.9 |
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(19.0 |
) |
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254.9 |
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1,341.6 |
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Diluted earnings (loss) per share |
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$ |
1.51 |
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$ |
(0.12 |
) |
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$ |
1.63 |
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1,358.3 |
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Year to date sales increased 56.5%. Year to date domestic and international sales each grew 56.5% with the largest contribution derived from International Wholesale growth. On a constant currency basis, the Company’s total sales increased 50.9%.
Sales grew across all segments with increases to Domestic Wholesale of 52.2%, International Wholesale of 52.3%, and Direct-to-Consumer of 69.0%. Improvements in Domestic Wholesale were the result of higher unit sales volume. Improvements in International Wholesale were the result of growth in China of 88.4% and Europe of 32.9%. Direct-to-Consumer comparable same store sales increased 54.8%, driven by an increase of 59.4% domestically and 40.8% internationally.
Gross margin increased 308 basis points to 49.5% primarily driven by increased gross margins in the Direct-to-Consumer segment, which was the result of increased average selling prices and reduced promotional activity.
SG&A increased by $240.2 million or 25.5%. Selling expenses increased by $83.4 million or 62.1%, primarily due to higher global advertising costs. General and administrative increased by $156.7 million or 19.4%, primarily due to higher incentive compensation and labor costs as well as higher global warehouse and distribution expenses.
Earnings from operations were $358.9 million, an increase of $375.1 million compared to a loss of $16.2 million in the prior-year period.
Net earnings were $235.9 million and diluted earnings per share were $1.51.
The Company’s effective income tax rate was 20.3%.
Balance Sheet
Cash, cash equivalents and investments totaled $1.32 billion, a decrease of $258.5 million, or 16.4% from December 31, 2020. The Company repaid $452.5 million on its revolving credit facility in the second quarter.
Total inventory was $1.06 billion, an increase of $40.5 million or 4.0% from December 31, 2020. Increased inventory levels primarily reflect growth in the International Wholesale segment.
Outlook
For the fiscal year 2021, the Company believes it will achieve sales between $6.15 billion and $6.25 billion and diluted earnings per share of between $2.55 and $2.65. Further, the Company believes that for the third quarter of 2021, it will achieve sales between $1.60 billion and $1.65 billion and diluted earnings per share of between $0.70 and $0.75.
Store Count
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Number of Store Locations as of |
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Number of Store Locations as of |
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December 31, 2020 |
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Opened |
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Closed(1) |
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June 30, 2021 |
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Domestic stores |
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523 |
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12 |
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(23 |
) |
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512 |
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International stores |
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331 |
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13 |
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(5 |
) |
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339 |
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Joint venture stores |
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467 |
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67 |
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(52 |
) |
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482 |
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Distributor, licensee and franchise stores |
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2,570 |
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260 |
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(106 |
) |
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2,724 |
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Total Skechers stores |
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3,891 |
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352 |
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(186 |
) |
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4,057 |
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(1) Does not reflect temporary closures due to the COVID-19 pandemic. |
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Certain Non-GAAP Measures
To supplement our unaudited condensed consolidated financial statements presented under generally accepted accounting principles in the United States (“GAAP”), we use the non-GAAP financial measures presented to evaluate our results of operations, financial condition, liquidity and indebtedness. We believe that these non-GAAP measures provide useful information to investors regarding financial and business trends related to our results of operations, cash flows and indebtedness and that when this non-GAAP financial information is viewed with our GAAP financial information, investors are provided with valuable supplemental information regarding our results of operations, thereby facilitating period-to-period comparisons of our business performance consistent with how management evaluates the Company’s operating performance and liquidity. In addition, these non-GAAP measures address questions the Company routinely receives from analysts and investors and, in order to assure that all investors have access to similar data the Company has determined that it is appropriate to make this data available to all investors. None of the non-GAAP measures presented should be considered as an alternative to net income or loss, operating income, cash flows from operating activities, total indebtedness or any other measures of operating performance and financial condition, liquidity or indebtedness derived in accordance with GAAP. These non-GAAP measures have important limitations as analytical tools and should not be considered in isolation or as substitutes for an analysis of our results as reported under GAAP. Our use of these terms may vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation. Reconciliations of these non-GAAP financial measures to the most nearly comparable GAAP financial measures are presented below.
Second Quarter 2021 Conference Call
The Company will host a conference call today at 1:30 p.m. Pacific Time / 4:30 p.m. Eastern Time to discuss its second quarter 2021 financial results. The call can be accessed on the Investor Relations section of the Company’s website at investors.skechers.com. For those unable to participate during the live broadcast, a replay will be available beginning July 22, 2021 at 7:30 p.m. ET, through August 5, 2021, at 11:59 p.m. ET. To access the replay, dial 844-512-2921 (U.S.) or 412-317-6671 (International) and use passcode: 13721146.
About SKECHERS U.S.A., Inc.
Skechers, The Comfort Technology Company based in Southern California, designs, develops and markets a diverse range of lifestyle and performance footwear, apparel and accessories for men, women and children. The Company’s collections are available in the United States and over 170 countries and territories via department and specialty stores, and direct to consumers through 4,057 Company and third-party-owned retail stores and e-commerce websites. The Company manages its international business through a network of global distributors, joint venture partners in Asia, Israel and Mexico, and wholly-owned subsidiaries in Canada, Japan, India, Europe and Latin America. For more information, please visit about.skechers.com and follow us on Facebook, Instagram, Twitter, and TikTok.
